At the Wellhead: a shale gas battle pops up in South Africa

Battles over the environmental impact of shale gas are a now well-entrenched part of a debate over US energy policy. But they’re not limited just to the US, as Jacinta Moran discusses in the “At the Wellhead” column from Platts Oilgram News.

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In February, a government-imposed moratorium on exploration for shale gas in South Africa expires and although it is not expected to be extended, there remains uncertainty that work will proceed in the country as normal.

Over the last two years, the subject of developing shale gas resources in the semi-arid Karoo region, thought to contain trillions of cubic feet of shale gas, has stirred emotional debate throughout South Africa.

Public concerns have focused on hydraulic fracturing, in which drillers blast millions of liters of water, sand and chemicals into shale formations to release natural gas. Critics say the process could lead to contamination of water supplies in the sensitive Karoo environment.

Opponents include Treasure the Karoo Action Group (TKAG), Greenpeace and local farmers who want to know whether fracking can work without damaging the environment, where the massive amount of water needed will come from and what investment opportunities are there.

The biggest critic, TKAG, says most people in the small towns and farms of the Karoo have not been informed of the dramatic effect fracking for gas could have on their livelihoods and health.

Proponents believe it is a potential game-changer in South Africa’s desperate search for energy sources. The International Energy Agency, which estimates the Karoo might hold reserves of 485 Tcf, says shale gas could not only improve energy security but also would reduce greenhouse gas emissions.

Shell, which has submitted an application for rights to explore 80,000 sq km of the region, says shale gas in the Karoo would make South Africa energy self-sufficient for decades.

South Africa has very limited oil reserves, and imports from the Middle East and Africa meet about 95% of the country’s oil requirements. Excessive dependence on imported oil from high-risk regions makes the country vulnerable to both economic and national security problems, and high oil prices are a major threat to the country’s overall energy security.

The country is looking at ways to shift its dependency on coal. A government plan proposes nearly halving the share of coal in the country’s energy mix to 48% by 2030 from about 90% today, using renewable energy such as wind and solar. In November last year, state-utility group Eskom received a loan from the World Bank to finance the building of the country’s largest solar energy and wind power generation projects.

The country was rocked by power cuts in 2008, sparking one of worst crises in its history with the national grid brought to near collapse.

With the help of outside funding, Eskom has been recommissioning older power stations that had been mothballed but it also warns that domestic demand will exceed supply until at least 2013 when the first new power stations will be brought online.

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Aside from Shell, other companies interested in exploring in the Karoo include the US’ Falcon Oil & Gas and Australia’s Sunset Energy.

The government has imposed a moratorium on exploration in the area until February 2012 and set up a task force to research the full implications of fracking.

South African petrochemical giant Sasol, which led a consortium with Norway’s Statoil and the US’ Chesapeake Energy, has shelved its exploration plans in an 88,000 sq km area cross southern KwaZulu Natal and parts of the Free State.

The moratorium has halted Shell’s plans but industry officials say it is unlikely to be imposed again when it expires in February.

Environmentalists though argue the moratorium should be maintained indefinitely pending the conclusion of scientific studies into the evolving technology and its levels of risks to the environment.

Shell accepts that confusion and misinformation about the link between gas drilling and water supplies contribute to public concern about drilling in the Karoo. It says it supports regulation that aims to reduce risks to the environment and insists it will be applying appropriate operating standards, and contamination of water would not occur.

But TKAG’s national coordinator, Jonathan Deal, says fracking will involve boring through aquifers to get to greater depths, which carries the risk of chemicals leaking into groundwater.

Greenpeace Africa says that instead of fracking and jeopardizing precious water supplies in the process, the government should be focusing on clean, renewable energy solutions. South Africans need a new energy system that replaces dirty fossil fuels with power it can use sustainably. Shale gas, Greenpeace says, is not that.

Shell argues the gas in some cases lies thousands of meters below aquifers, and that it is virtually impossible for liquid or indeed gas to reach drinking water. Given the controversy and public anxiety around the issue of fracking in the Karoo, a transparent and open approach is not only essential for good governance but may help dispel what the industry believes are the significant misconceptions about shale gas.